The Wealthy Idiots

Is the LASER Fund Legitimate? I suppose it depends on what you mean by the word “legitimate”. If you follow the proper definition of the word, then yes, the LASER Fund is legitimate. The LASER Fund is simply Doug Andrew‘s version of Index Universal Life. Index Universal Life (IUL) is sold by a lot of major insurance companies and can be configured by the sales person to meet the needs of the policy holder. The LASER Fund merely describes how Doug Andrew would configure and use an Index Universal Life policy to be used a financial product for retirement.

So in short, it’s legitimate in the sense that’s legal. However, is it as powerful a product as Doug Andrew claims it to be? The answer to that question may be more complicated.

What is The LASER Fund?

As described in the introduction, The LASER Fund is simply a rebranding of Index Universal Life using the configuration, the author, Doug Andrew approves of. For certain life insurance policies, they come with a semi-financial aspect called a cash value. I go into more detail on how cash value inside of an IUL policy in a recent article.

For the sake of this article, It’s a Life Insurance policy which covers the policy holder for the entirety of their life but also has an investment portion. This investment portion of the policy allows the holder to take a baseline of interest or invest into something they call an “index”. This index will match whatever investment the holder chooses, usually with a cap and floor. The cap can be something like 12% with a floor of 0%.

On its face, it looks like an investment vehicle that can get all of the upsides of the market with little to no downside. According to Doug Andrew, this can be used as a retirement vehicle that is safer than the market and comes with advantages that he claims are exclusive to this product.

LASER stands for:

• L – Liquid
• A – Assets
• S – Safely
• E – Earning
• R – Returns

Doug Andrew argues that a good investment vehicle should be liquid, safe, have a good rate of return and be tax free. These items sound good on their face, and Doug Andrew likes to use this argument to claim that his version of an Index Universal Life policy, The LASER Fund, is the only option to accomplish these goals. This assumes that firstly, those are in fact the goals of an investment vehicle, and secondly, The LASER Fund is the only vehicle that meets those goals.

Are There Better Alternative To The LASER Fund?

The answer to this question is a simple and resounding YES!

Firstly, let’s look at Doug Andrew’s requirements for a good investment product are accurate. Let’s begin with Liquid. Liquidity is important, but only to a degree. If you’re investing properly, the goal is to invest over a long period of time and ignoring the overwhelming majority of your investments for decades. It’s important to have some of your assets be liquid in case of an emergency, unforeseen circumstances, or a major purchase like a house or car, however, if you have enough liquid to cover your goals, none of your other investments need to be liquid. As it turns out, investments aren’t liquid, like real estate, tend to have a better return. So no, your investments do not need to be all liquid.

Secondly, Doug Andrew argues that an investment should be safe. Safety is certainly important in a financial product, except that not everyone means the same thing when they say safe. A safe investment is one that has a great track record over a long period of time. The S&P 500 is a good example. It will have drops and look risky in the short term, but like the graph below shows, overall it grows at a good consistent pace. Doug Andrew would argue that it can’t have any volatility if it’s to be safe, but a simple review of Dollar Cost Averaging disproves this argument with ease.

Thirdly, a great investment should have a good return. And this is certainly true. There is always a balance between 3 competing forces when investing, risk, return and effort. A return on investment will usually be very strong if it has a lot of risk OR a lot of effort OR both. Real Estate has a higher return but requires a lot of effort. Investing in your friends business as a potential for a high return but carries a lot of risk. What we are looking for is something with a great consistent return that carries low risk and requires low/no effort. When it comes to passive investments, ie. something with no effort, there seems to be an equalizing factor. These investments tend to balance around a long term return between 8-12%. Doug Andrew argues that The LASER Fund fits into this category but will usually gloss over the fees associated with his plan. If take a plan that return 8-12% and add fees, your returns will be less than competing products.

Lastly, he argues it should be tax free. I think this displays one of the largest logical fallacies in personal finance. As much as I love paying as little taxes as humanly possible, when it comes to retirement, the goal is to maximize cash flow in retirement. In my previous article about Doug Andrew, I demonstrated this concept with a simple example. If you have $2 million taxed at 30%, is that better or worse than having $1 million tax free? $2 million at a 30% tax is $1.4 million, which according to me calculator, is more than a million. So the goal isn’t tax free necessarily. The goal is maximizing your retirement and if the better option is a tax free one, great! If not, then it really doesn’t matter. Taxes are merely a cost concern when determining which strategy to choose, nothing more.

After all of that, is there a better option to accomplish the goals we just outlined than The LASER Fund? Yes there are a few:

• 401k – the match provides an instant return of 50-100%. If invested into something like the S&P 500, the growth of 11-ish% will be from your investment AND the match. If you have a 100% match, your money gets an instant 122% return on investment. NOTHING BEATS THIS.
• Roth IRA – The Roth IRA is simply a brokerage account that allows the account holder to remove their money tax free at retirement. You can put your money into something with good, consistent, long term gains and then tax withdrawals completely tax free.
• Taxable Brokerage Account – I’ve run the numbers on the returns from an exemplary IUL (LASER Fund) against the S&P 500 and it’s not even close. Over a very short amount of time, even if you don’t even include the disadvantage of the IUL’s fee structure. the S&P 500 comes out on top by magnitudes. So a taxable brokerage wins in the total value department. But also, you can borrow against a taxable brokerage in the exact same way you can borrow against your IUL. Effectively making these two methods completely equivalent in tax advantages, which is odd for an account called “Taxable”.

There is certainly many more options that will beat The LASER Fund. A few more may be real estate. high yield savings, bonds, even leaving your money in a bank as this may have less risk depending on your financial situation.

Is The LASER Fund Legitimate?

So to finally answer the question we all came here for, is The LASER Fund legitimate? Yes…but only terms of legality. Am I personally going to purchase any form of IUL including The LASER Fund? Absolutely not. If every advantage of this plan exists in the world for free or for cheap, there is no reason to pay someone a commission to have these features. It makes no sense at all.

The LASER fund is legitimately a poor excuse for a financial product and the primary beneficiaries of this product are the sales people pushing it. If you are genuinely confused about what to do with your money, find a fee only financial advisor and have a good discussion about the WHY you would choose something over another option. Another great way to ensure you are picking the right products is to find people who don’t make commissions from the decisions you make and ensure their suggestions stand up to scrutiny. These people could be any wealthy idiot you may know.